In Dallas and across the country, hospitals, doctors and dealers have made Medicare the nation’s sweetest crime. The feds are now trying to shutter the door.

Houston Riverside General Hospital specialized in the kind of medicine its better-heeled brethren did their best to avoid: treating the poor, the mentally ill, the drug-addled.

So it's no surprise that the 95-year-old nonprofit — formerly known as Houston Negro Hospital — shared the same broken finances as the people it served. Most patients couldn't pay their own way, leaving Riverside to survive off the rock-bottom reimbursement rates of Medicare and Medicaid.

At one point, it was losing $10,000 a day. That's when executives decided to cauterize the wound with a hot poker of fraud.

Gage Skidmore

Florida Governor Rick Scott was CEO of a hospital company that was nailed with two sets of books. Then he went into politics.

In 1996, the state of Texas accused Riverside of padding fees and billing for drug rehabilitation services it never provided. Texas canceled $1 million in contracts and demanded that the hospital repay another $763,000. It also urged the feds to audit Riverside's Medicare and Medicaid payments.

Yet charges of fraud weren't enough for bureaucrats to fully close the spigot. The money continued to flow.

It would take another eight years before the state finally had enough. In 2004, it moved most of its drug-treatment contracts to more trusted providers, slashing Riverside's funding by 75 percent.

Unfortunately for the taxpayers, CEO Earnest Gibson III had friends in influential places.

Congresswoman Sheila Jackson Lee, a Houston Democrat, demanded an investigation of the cuts, calling on Governor Rick Perry to restore the money. Perry, who had appointed Gibson to the Board of Regents at Texas Southern University, was happy to oblige.

By the time it was over, Riverside emerged with another $3 million.

It wasn't until 2011 — 15 years after the initial accusations — that law enforcement got serious. That's when the feds nailed administrator Mohammad Khan, who confessed to enriching the hospital through a kickback scheme.

He'd been paying "recruiters" $300 a head to bring Medicare patients to Riverside's six psychiatric clinics. They arrived by the van-load for daily therapy sessions they rarely qualified for or received. Medicare picked up the $116 million tab.

When the scheme was discovered, the Center for Medicaid and Medicare Services (CMS) finally halted the hospital's payments. But in the eyes of Jackson Lee, a meager $116 million theft was hardly cause to rush to judgment. Her husband, Elwyn Lee, once served on Riverside's board. So the good congresswoman again rode to the hospital's rescue.

"Even if more harmful acts prove to be true," she wrote to CMS, "an entire institution should not be penalized by the acts of one person."

In Riverside's case, that "one person" would abruptly multiply. Kahn ratted out CEO Earnest Gibson III as his co-conspirator. The feds also nabbed Gibson's 35-year-old son, Earnest IV. He ran one of the psychiatric clinics and was charged with billing nearly $700,000 for care that "was not medically necessary and, in some cases, not provided," according to prosecutors.

Investigators discovered that, since 2005, the hospital had been swindling the feds to the tune of $22 million a year. Kahn pleaded guilty. The two Gibsons and five others await trial on charges of fraud, conspiracy and money laundering.

By this time, Jackson Lee had no choice but to dial down her patron sainthood. She refused to comment for this story.

Yet another member of Congress is happy to talk. Houston-area Republican Kevin Brady has been trying to draw attention to health-care fraud in Houston since entering office in 2009. It seems that CMS, the agency charged with protecting Medicare dollars, failed to notice that the city's private ambulance services were robbing it blind.

That year, companies in Harris County, Texas, billed Medicare $62 million for emergency shuttles. By comparison, New York City received $7 million for the same services. Brady's concerns went ignored until 2011, when a Houston Chronicle series dragged the scam into the light.

Think of the Medicare program as a bank that never bothered to buy a safe. Everyone from HMOs to drug dealers have been caught robbing it time and time again, stealing the kind of money that makes the sequester look like pocket change. While the credit-card industry uses data-mining techniques to flag fraud within minutes, CMS has allowed the most obvious schemes to run for years, rarely the wiser.

"Washington has long bragged that Medicare only has a 2 percent administrative overhead," Brady says. "But with that, we've paid a steep price in far too much fraud."

Given how often such blatant thievery goes undetected, no one's sure how much fraud there really is. Conservative estimates place the bill at $100 billion annually. The more adventurous peg the figure closer to $300 billion — three times what the feds spend on education.

It has left federal health care little more than an unlocked home, where street punks and gangsters, doctors and even states walk right in and help themselves to whatever's inside.

All You Need Is the Government and Your Imagination

The stealing has become so sweet that Medicare fraud threatens to overcome drug dealing as America's favorite quick-riches pastime. Street criminals can easily pull in $25,000 a day without carrying a gun. Throw in modest sentences for getting caught, and it's the criminal equivalent of saccharine.

Take Cuban expat Armando Gonzalez, who served five years for dealing crack. When he got out, he started several outpatient psychiatric clinics in Miami with a scheme similar to Riverside's. He paid assisted-living facilities kickbacks to bus in residents suffering from retardation and dementia. The clinics would then bill Medicare for services the "patients" weren't eligible for or didn't receive. By the time the feds started sniffing around in 2008, Gonzalez had already made off with $28 million, enough to fund a personal fleet of 17 luxury vehicles.

this country makes me fucking physically ill...knocking over a liquor store and stealing $400 bucks will get you a longer term in jail then stealing 73 million dollars from taxpayers...possessing marijuana which harms no one will get you a longer term...unless you happen to be rich or influential this country will fuck you up the ass continually and never stop the raping

Many believe there are patients who scam Medicare/Medicaid. But, the real culprits tend to get away with fraud. Sometimes, they are arrested and incarcerated; however, before cuts are made to this program, the FBI needs to weed out those who are abusing the system, the physicians.

I can't help but see a distinct connection between the conservative movement's obsession with "smaller government" and abuse like this. When you shrink federal regulatory agencies to the point they're practically defunded, guess what? Many regulatory agencies simply do not possess the manpower to protect the American people from fraud. This was obvious during the 2008 downturn when the SEC was so out-gunned that even if they could have brought financial fraudsters to trial, the government is likely to face odds of 20:1 in terms of lawyers and the money to pay for them. And while Medicare itself recognizes this problem, well, there's nothing to say about this but...

They give out 5-10 grand to some political clown and then they own them

Sure you will have "water carrier" democrats but that aint where the big moneys at

"HCA also admitted fraudulently billing Medicare and other health programs by inflating the seriousness of diagnoses and to giving doctors partnerships in company hospitals as a kickback for the doctors referring patients to HCA. They filed false cost reports, fraudulently billing Medicare for home health care workers, and paid kickbacks in the sale of home health agencies and to doctors to refer patients. In addition, they gave doctors "loans" never intended to be repaid, free rent, free office furniture, and free drugs from hospital pharmacies"

It should be noted the Frists , Pere & Fils kept their heads because they found a fall guy to blame.

They bought out all these old inner city charity hospitals barely getting by and turned them into cash cows

There are several problems: the DOJ-state AG has no political will to go after the big hospital chains or other big time offenders, many of whom are prominent in their communities-Parkland -UTSW THR etc and also have staff and administraion who are political donors, and or tout their "role" as erstwhile "safety nets for the poor." These less than sterlling big hospital chains are also slated to enjoy special immune status under the ACA ACO program which will put them beyond the reach of Anti-Trust scrutiny- soon -2014. The HHS is an IT nightmare with outdated computer banks and staffers who are poorly/inadequately trained (not very competent). The individual docs in the community who are honest are under constant threat of "reign of terror" from low yielding "RACS" audits of simple mistakes with HUGE potential penalties because they are easy targets. Good article... the big fish will continue to swim away under our current system of "justice". I applaud you for naming names however.

Maybe you should read the article. The largest offenders are not physicians, --some even appear to be third party administrators of the programs themselves, put in place by the govt. administrators... If you paid the physicians 0, the program would still lose money through fraud. FYI

You ARE paying more taxes under PPACA.(device taxes, higher insurance premiums real estate taxes etc.) The problem simply is that the HHS-CMS is ill euipt or inept at dealing with losses from fraud even under the current system. Imagine what will happen when there are more enrollees. The problem is not one of government" sizing"-- it is one of administrative competence. The current CMS structure is too complex and outdated to administrate efficiently but, unfortunately for the tax payer, the administrative costs continue to rise, while payments to the providers (i.e. those actually doing the work) continue to shrink (see the David Feinwachs entry-above). The providers get 20% of the total availabe funds. If you gave the providers 0%, you would still lose money through fraud and incompetence. Sibelius is a former Gov of a mid sized state and doesn't know any more about the technical requirements of administrtion of HHS than the gov of this state--she is a politician.

There are as we speak "formes fruste" of "Fristian" kickback activity going on at large non for profit hospital chains organizing ACO's to "better serve the public" These are simply vehicles to rip off the public under the guise of healthcare "reform". The scam artists are always ahead of the government and sometimes operate under govt. sponsorship.